Latest data on rental returns highlights the best UK cities and towns for buy to let investment.
Buy-to-let is booming, with growing numbers of professional and amateur investors seeking to pour yet more cash into a market worth £1 trillion.
Where to invest?
New research by HSBC, which conducts an annual review of rental yields around Britain, shows that Manchester, Kingston upon Hull and Blackpool are the best places to invest right now. This is due to modest property price rises and strong rental demand.
But even in these areas landlords are seeing modest returns of less than 8pc before tax, mortgage and maintenance costs. In London where property prices are highest, returns fall to below 3pc in some areas.
But for most landlords with one or two properties the key to success is capital growth.
If the property you invest in grows in value, you will increase your total profits. Of course, future house price growth is impossible to predict with any accuracy, so the cost of property against the average annual rent, known as the “rental yield”, is a good indicator of where to buy.
Where should I buy-to-let?
Growing numbers of Britons are renting their homes instead of buying, thanks to rising house prices and relatively stagnant wages. More than a third of properties in some parts of London are privately rented. Other areas of the UK are moving this way. At least a quarter of properties in Manchester, Bournemouth, Oxford, Brighton and Hove and Reading are now owned by landlords.
But do your homework carefully and focus on locations where rents have outpaced house prices.
HSBC’s survey shows landlords in Manchester are making the highest rental yields.
Here average house prices have increased by 4pc from £104,244 in 2014 to £108,870 now, while average annual rents have kept pace, up from £8,316 to £8,628. The average gross rental yield here is 7.98pc.
Manchester is the second most populated city in the UK with an urban area population of 2.55 million. Manchester has the the second largest city economy in the UK after London. It is the home to 105,000 students spread across the four universities. As a result of this, there is always a demand for quality properties that provide a high yield. Additionally students tend to organize and pay a deposit for their accommodation for the next academic year well in advance of the start of that year. This makes it easier for a buy to let investor to plan around void periods.
With attractions such as the G-mex, Manchester City FC, Manchester Utd FC and the famous Manchester nightlife, Manchester is also the 3rd most visited city in the UK.
Manchester Airport is the 3rd busiest airport in the UK by passenger numbers. Bringing jobs and prestige to this growing city.
The average rent in the city is £944pcm according to home.co.uk
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